He says the UK economy is now at a long-term inflection point and that we can no longer rely on financial services and consumption to drive us forward.
He says the one in five prospect of Armageddon is one of three scenarios. He says there is a 50 per cent chance that “green shoots” of recovery appear in the likes of cyclicals that start to rally.
“It may only be a slowing in the rate of decline,but the stockmarket is likely to respond positively to some signs that there are early, although small, signs of a pickup. If this is the case, then selective economically-sensitive stocks, such as cyclicals, are offering a once in a generation buying opportunity.”
The other scenario is that the Government overdoes any potential stimulus to the market, creating an inflation problem due to quantitative easing. Mott says: “In our view, the authorities should delay quantitative easing – effectively increasing the money supply – until it is certain that recent aggressive initiatives have not worked.
“My view is that history is littered with examples of authorities tightening, raising interest rates, at too late a stage of economic recovery. We should remember, also, that this need for interest rate rises could coincide with a Labour Government trying to get itself re-elected in spring 2010.”